Appendix A – Further essential background/detail on the proposal MetroBus Budget Update and Part 1 Claims Purpose of the report To seek authority to increase the budget for the MetroBus Programme, as outturn costs are forecast to exceed the current approved budget, being an increase from £220m to £230.496m. This represents a cost increase to Bristol City Council of £6.843m since the Cabinet report of November 2016. To seek authority to enter into a Memorandum of Understanding with South Gloucestershire and North Somerset Councils for the purpose of administering the Part 1 Claims process and for Bristol City Council to be the lead authority for the determination and administration of valid claims and to host the Claims Team. To approve delegation of authority to the Service Director Property, to approve settlement terms for valid Part 1 Claims and to autohrise the payment of claims negotiated and recommended for payment by the Claims Team. Recommendations for the Mayor’s approval:

1. To approve the increase in budget for the MetroBus programme of £6.834 million to meet the current forecast budget pressure;

2. To enter into a Memorandum of Understanding (MoU) between Bristol City, South Gloucestershire and North Somerset Unitary Authorities to ensure that a properly qualified team are set up and provided with the necessary resources to process and adjudicate claims made under Part 1 of the Land Compensation Act 1973

3. Authority is delegated to the Service Director for Property, to approve settlement terms and payment for valid Part 1 Claims.

Background

1. The MetroBus programme is consistent with Council policy and priorities, which Includes: a. the Joint Local Transport Plan 3 (JLTP3); b. Bristol’s Core Strategy; c. The Greater Bristol Strategic Transport Study (GBSTS).

They are also aligned with both South Gloucestershire’s and North Somerset’s Core Strategies. Joint Local Transport Plan 3 provides the statutory basis for how both Bristol City Council, and more widely the West of England Authorities, plan and deliver transport infrastructure within the region.

2. MetroBus overall aims are to:

a. Reduce carbon emissions; b. Support economic growth; c. Promote accessibility; d. Contribute to better safety, security and health; e. Improve quality of life and a healthy natural environment.

3. The implementation of these schemes will provide an effective Integrated bus rapid transport

system that offers an alternative to car use, reduces congestion and consequential carbon emissions, supports the city's dynamic and growing economy and improves quality of life. These schemes also support the aspirations for a prosperous and inclusive community, and seek to ensure a sustainable future for Bristol, North Somerset and South Gloucestershire.

AGENDA ITEM No.?

4. The MetroBus project is a £203million capital investment in transport infrastructure in the West of England. Bristol City Council is contributing £45.7m from local contributions towards this total. MetroBus is a joint project between Bristol City Council, North Somerset Council and South Gloucestershire Council. MetroBus is a high capacity rapid public transport. Similar schemes to MetroBus are planned or in operation in Manchester, Leeds, Swansea and Cambridge.

5. Schemes like MetroBus are designed to fit in between local bus and rail travel, providing rapid and reliable journeys to destinations not easily reached by rail. The first services are programmed to start operating in late 2017. Further details of all three schemes can be found at the Travel West website http://travelwest.info/projects/metrobus. The AVTM and NFHP schemes are currently under construction, SBL was completed and opened to traffic in January 2017. Photographs of some of the main elements of MetroBus Programme are included at the end of this Appendix.

6. MetroBus services will be quicker and more reliable than existing bus services and will run on a combination of segregated busways and bus lanes, separate from general traffic where possible, with priority over other road users at traffic signals.

7. MetroBus comprises three major schemes as follows;

a. Ashton Vale to Temple Meads (AVTM) – project managed by Bristol City Council. Funded by

Department for Transport with local contributions by both Bristol (80%) and North Somerset (20%) Councils;

b. South Bristol Link Road (SBL) – project managed by North Somerset Council. Funded by Department for Transport with local contributions by both North Somerset (50%) and Bristol City (50%) Councils;

c. North Fringe to Hengrove Package (NFHP) – project managed by South Gloucestershire Council. Funded by Department for Transport with local contributions by both South Gloucestershire (61%) and Bristol City (39%) Councils. These percentages for local contributions relate to the period after Full Approval only. Prior to approval, costs were split on an equal basis.

8. The MetroBus Programme also delivers on a number of the Mayoral Corporate Priorities as follows;

a. Our Transport – Delivering an integrated, accessible and sustainable public transport system is essential to our city’s future. We will address the importance of getting Bristol moving, from protecting pedestrians to planning integrated travel to join up our city. We want an affordable, low carbon, accessible, clean, efficient and reliable transport network to achieve a more competitive economy and better connected, more active and healthy communities;

b. Neighbourhoods - Our neighbourhoods will be great places for people of all ages to live, work, learn and play. We will work with Bristol citizens and city partners to create connected neighbourhoods that are clean, green, healthy, safe and inclusive;

c. Place - Bristol needs to maintain and grow its strong economy but it has to be the right kind of economy where everyone benefits from its success.

The Cost of MetroBus

9. In 2015 the estimated cost for the whole MetroBus project was £204.3m. Each of the three projects had a risk allowance within their budgets. This allowance was intended to cover both unplanned increases in cost due to changes in inflation and other cost increases resulting from changes to the projects.

Table 1 – Scheme budget and Risk allowances (prior to construction starting)

10. In the early stages of design and construction there were a number of significant current cost

pressures arose across the three MetroBus construction projects, as follows: a. Protester Action and increased security across the programme – current cost totals £4.49m

(AVTM £0.2m; NFHP £2.99m; SBL £1.35m); b. Network Rail design change requirement for AVTM ‘skew bridge’, bridge across Bristol to

Portishead railway line which runs alongside Winterstoke Road, cost estimate around £2.5- £3.0m;

c. Network Rail delay on construction of under bridge for SBL delaying and causing disruption on the main highway contract – valued at £1.3m;

d. AVTM - Higher amounts than expected of non-inert materials found during construction (£0.7m at this point, but now risen to £1.2m+), unforeseen ground conditions and the foundation design required for AVTM to pass under an existing heritage structure (Ashton Road Bridge owned by Network Rail) (£0.4m);.

e. NFHP cost increases across all of the main construction contracts, but mainly the M32 junction and bus lane, City Centre, Bradley Stoke Way and East Fringe. Contract compensation events totalling £6.8m which cannot be accommodated within the project risk budget from delay costs primarily due to longer than anticipated time to discharge planning conditions (£1.4m); changes to works information/ design amendments (£4m) and unforeseen/additional services & utilities diversions (£1.4m).

11. Following further analysis of cost pressures and risks for the three projects undertaken in July of

2016 an assessment of forecast outturn costs above budget was undertaken for 3 sensitivity levels (S1-3 inclusive). The results of this exercise were reported to Cabinet on 1st November 2016 agenda item Number 17 Period 5 Finance Report.

Table 2 – Sensitivity Testing by Project – forecast costs above budget (Nov 2016)

Forecast Outturn Cost

Project S1 – Lower Point (£m) S2 – Mid Point (£m) S3 – Upper Point (£m)

AVTM 54.5 55.2 56.1

NFHP 112.1 113.3 115.3

SBL 47 47.4 48.6

Total 213.5 215.9 220.0

Scheme

Total budget

£m

Risk budget

£m

Risk as a percentage of budget

AVTM 55.5 3.72 6.8%

SBL 47.0 5.60 11.9%

NFHP 101.8 7.27 7.2%

Total 204.3 16.59 8.1%

12. The decision from November 2016 Cabinet was to fund the initial £5.0m additional budget requirement from prudential borrowing, with the revenue costs being funded from corporate capital financing budgets. Should the additional £2.1m contingency be required, this should be funded from existing Transport Capital Programmes allocations and other funding opportunities such as grant and other project funding opportunities.

Current Forecast Outturn cost

13. Further reviews of current forecast out-turn cost have been undertaken in the spring and early summer of 2017 and the current predicted outturn costs is presented in Table 3 which shows an increase in forecast outturn costs of £10.496million above that reported to Cabinet in November 2016.

Table 3 – Sensitivity Testing by Project – forecast costs above budget (June 2017)

Project Approved Budget £m

S2 (P50 QRA) £m

S3 (P80 QRA) £m

AVTM 56.100 61.790 62.660

Budget Variance 5.69 6.560

NFHP 115.300 117.914 118.776

Budget Variance 2.614 3.476

SBL 48.600

47.623 49.060

Budget Variance -0.977 0.460

Total 220.000 227.327 230.496

Reasons for cost increases since those reported to Cabinet November 2016

14. Ashton Vale to Temple Meads a. Sub-contracts, that the main Contractor on the Guided Busway (AVTM Contract) 1 had to let

in second half of 2016, attracted high costs far above those that they assumed at tender stage. This is exacerbated by an improving/buoyant construction market due to lots of construction projects in the region. The Local Authorities, Bristol and North Somerset Council’s share of these costs is 50% with the Contractor taking half the pain. This element rose by approx. £1.6m during this time, over the value allowed for in earlier forecasts;

b. A significant amount of design evolution has been required for Contract 1. This has been more expensive than that assumed, by the Contractor and their Designers, at tender stage. In particular this has resulted in a significant increase in piling works, which has knocked-on to other works (from design through to surfacing). Works on the skew bridge have been more constrained and complex. As noted in 14a above, because it is a pain/gain defined cost contract, this means the Local Authorities pays for a 50% share of these increases. This element of cost rose by approx. £0.7m during this time;

c. A considerably larger volume of contaminated and inert material has to be removed from site, over and above that estimated at pre-tender stage and forecast for November 2016 cabinet report. The Authorities pay these costs in full (increase of £0.5m);

d. Revised land-compensation budget based on changes in land-ownership, designation and likelihood of claimants making case for high compensation (0.4m);

e. Difficulty obtaining Network Rail permissions to work next to track and obtain permissions to work over foundations of Network Rail road bridge has meant resequencing and delay costs (£0.2m) in addition to known build costs. The implications of building the skew bridge

to rail electrification standards has also meant upgraded specification on parapets not captured in earlier design (£0.125m);

f. Upgrading the Part 1 Claims budget now that full set of estimation work is completed and a decision made about how to administer the scheme, resulting in uprating costs for: claim team costs, claimant legal and surveyor costs (£0.24m);

g. Compensation events for remedying problems with piles at Bathurst Basin Bridge and delay costs from 3 months of testing, remediation and monitoring before works could re-commence (£0.2m);

h. Bristol Water – South Bristol water main diversion cost increased by +35% against original estimate and quote (£0.113m).

15. South Bristol Link

a. Risk provision is estimated at £5.7m. This is a hugely skewed figure as it includes claims which have a high value but very little chance of happening at that claim value (based upon contract and legal advice/assessment);

b. The main risks to SBL remain the successful conclusion and agreement on both the highway contract but in particular on the Network Rail contract on which we have a robust independently assessed and legally secured position that no additional costs above that within the original budget allocation (with risk included) is expected.

16. North Fringe to Hengrove Package

a. Increases in project management costs due to additional resource being added to the project team and factoring in project management requirements for a longer period;

b. Increases in site management costs due to the longer duration of construction contracts and additional resource required to resolve on site issues;

c. Additional delays to the completion of Bradley Stoke Way, due to further unforeseen utility diversion work;

d. Costs related to the delayed start of the M32 South Bound Bus Lane and M32 bus only junction due to awaited Highways England approvals;

e. Delay costs and additional construction costs relating to scheme changes and redesign of piling in the City Centre due to the difficulty and complexity of the City Centre environment;

f. Additional earthwork requirements on the Stoke Gifford Transport Link (SGTL) and the Hambrook Bridge;

g. Additional delay costs to the SGTL due to interfaces with Network Rail.

Table 4 – Share of budget pressure increases compared to Approved November 2016 Budget

†It should be noted that the ITS/Shelters budget includes a contingency of £699k and if this is accounted for the risk percentage for NFHP increases to 13%. Other options considered: Further de-scoping the scale of the MetroBus Programme, to make cost savings, has been considered but Officers have concluded that further de-scoping would fundamentally undermine the aims of the

Scheme

Risk budget P80 £m

Forecast outturn cost (S3)

£m

Risk as a percentage of

total

Approx. work remaining

£m

Risk as a percentage of

remaining

AVTM 1.532 62.660 2.43% 10.00 15.2%

SBL 0.862 49.060 1.8% 0.25 345%

NFHP 3.032 118.776 2.55% 28.48 11%†

Total 5.426 230.496 2.35% 38.73 14.0%

MetroBus Programme. It would also potentially undermine the quality and attractiveness of the offer for potential future operators of the MetroBus services across the West of England. Previously other options have been considered but are covered in previous Cabinet reports which are listed at the end of this report under the heading Access to information (background papers). Public sector equality duties: Before making a decision, section 149 of the Equality Act 2010 requires that each decision-maker considers the need to promote equality for persons with the following “protected characteristics”: age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex, sexual orientation. Each decision-maker must, therefore, have due regard to the need to: i) eliminate discrimination, harassment, victimisation and any other conduct prohibited under the Equality Act 2010. ii) advance equality of opportunity between persons who share a relevant protected characteristic and those do not share it. This involves having due regard, in particular, to the need to: - remove or minimise disadvantage suffered by persons who share a relevant protected characteristic. - take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of people who do not share it (in relation to disabled people, this includes, in particular, steps to take account of disabled persons' disabilities); - encourage persons who share a protected characteristic to participate in public life or in any other activity in which participation by such persons is disproportionately low. iii) foster good relations between persons who share a relevant protected characteristic and those who do not share it. This involves having due regard, in particular, to the need to tackle prejudice and promote understanding. None necessary for this report as the scope of the planned works are not being changed. Each of the three MetroBus schemes have Equalities Impact Assessments which have been detailed in previous Cabinet Reports as listed at the end of this report under heading Access to information (background papers). Eco impact assessment None necessary for this report but each of the three MetroBus schemes have Eco Impact Assessments which have been detailed in previous Cabinet Reports. This report deals only with budgetary issues and there are no proposals to change the scope of the programme currently. Resource and legal implications: Finance a. Financial (revenue) implications: Prudential borrowing revenue cost will be c£400k per annum over 25 years (Borrowing costs & % MRP for maximum c£6.5m of additional borrowing). Source of Revenue Funding is the Transport Revenue Budget parking income. Advice given by Tian Ze Hao, Place Finance Business Partner Date July 2017 b. Financial (capital) implications:

Cabinet held on November 2016 approved a revised funding envelope of £220m for the Metro Bus programme contract overall. The May 2017 MetroBus Joint Project Assurance Board (PAB) reported further increases in contract costs to the overall MetroBus programme and has estimated a further increase in forecast overspend of £10.496m, bringing the total estimated contract expenditure up to £230.496m. This proposal seeks approval for the funding to be allocated for the Bristol share of the identified overspend which equates to £6.834m.

Proposed Gross Budget

Cost Share Increase

Sub Project

Approve

d Nov 2016

This Propos

al

Grant Funded

BCC' cost Share

SG' cost

Share

NS' Cost

Share

BCC SG NS Total

Additional Cost

£m

£m £m £m £m £m

£m £m £m £m

AVTM (BCC 80%: NS 20%)

56.100

62.660 35.280 21.904 0.000 5.476

5.248 0.000 1.312 6.560

NFHP (BCC 39%: SG 61%)

115.300

118.776

51.100 26.394 41.282 0.000

1.356 2.120 0.000 3.476

SBL (BCC 50%:NS 50%)

48.600

49.060 27.600 10.730 0.000 10.730

0.230 0.000 0.230 0.460

Total 220.000

230.496

113.980 59.028 41.282 16.206

6.834 2.120 1.542 10.496

*based on Upper Point cost estimated *Included in the figures above, there are estimated management costs in relation to the Part 1 Claims. The majority of the overspend estimates relate to the Bristol Led AVTM project (£5.248m), key reasons for cost overrun have been identified as follows;

1. Subcontractor cost escalation £1.6m (pain/gain); 2. The original assumptions of likely cost and probability used for Quantitative Risk Assessments (QRA)

were flawed and significantly under-predicted the cost and frequency of risk items; this had been subsequently revised and resulted in £1.2m increase in cost estimates;

3. Design changes (pain/gain) vs. tender stage assumption £0.7m; 4. Disposal of further Contaminated Material £0.5m; 5. Revised land compensation budget estimate £0.4m.

Further considerations: 6. The project team for AVTM had re-run the QRA assumptions with revised methodologies on

potential cost assessments with a group of expertise including contract manager, client project manager, and the project SRO. However, no one from Finance was part of the discussion/meeting to challenge these assumptions. Going forward this need to be a regular exercise with involve colleagues from Finance;

7. Please note the AVTM contract is subject to pain-gain cost share agreement with the main contractor. However, the contract is set in such a way means that shared costs would work on a reclaimable basis. I.e. the Council would have to pay the 100% of the overrun costs first and subsequently reclaim the contractor share of the costs after the contract is closed. This would mean the council would need to cash flow an additional £4.3m until September 2017. Please note, this amount is NOT included in the £6.834m net overrun figure above;

8. NFHP scheme has been recently review by South Gloucestershire and SBL has been reviewed by North Somerset as the lead Councils and the QRA processes are now aligned to the same principles used in AVTM.

This report proposes to: 9. Fund the cost overrun of £6.8m by reprioritising Local Transport Capital Programme in 2017/18 and

making an one-off payment of £400k in year (bearing in mind a £2.1m payment will also be made against cost overruns approved by November 2016 cabinet report from the same funds);

10. Borrowing the balance of £6.434m over 25 years. The revenue implication of the additional borrowing will be met within the Transport Revenue budget. And agree to ring-fence additional parking income for this payment;

11. This report also proposes the flexibility for potential capital over-repayment in any given year, in consultation with cabinet members based on the agreed priorities.

The total estimated revenue borrowing cost implication over 25 years is c£400k per annum. Options considered:

12. Implications of the proposed option: The council is highly geared i.e. the council has a large amount of debt compared to available capital. There is currently no headroom for any additional prudential borrowing in the capital programme. To borrow the additional £6.834m would require reprioritisation of the existing capital programme, i.e. stop certain schemes and redirect the funding / borrowing. Please also note this report proposes to reprioritise the transport revenue budget to accommodate the borrowing cost implications while the council still has £42m funding gap over the MTFP period. This will impact on the ability to further close this funding gap;

13. Drawn down from capital contingency provision in the capital programme. There have already been multiple calls upon this pot over the coming MTFP period, including the Arena development and Colston Hall project. Please also note as the Metro Bus expenditure will incur in year 17/18, this currently miss matches the phasing of the contingency provision in the capital programme taking into account other calls on this contingency budget;

14. Alternative funding sources should be explored, e.g. at West of England funding.

Key risks associated with this proposal are: 15. The Transport Capital Programme is largely funded by DfT block grants which are now passed

through WECA. Only 17/18 budget has been agreed by WECA, and future years funding may be subject to change. Therefore this will have an impact on the delivery priorities within the overall transport capital programme in order to accommodate up front use these funding facilitated by the prudential borrowing;

16. Risk of future cost increases: the Council has less control over schemes managed by South Gloucestershire and North Somerset. However, the QRA processes are now aligned to the same principles used in AVTM.

Advice given by Tian Ze Hao, Finance Business Partner Date July 2017 c. Legal implications:

1. Part 1 Claims made under Part 1 of the Land Compensation Act 1973 permit a claim for compensation by owners and occupiers of property that has reduced by in value by more than £50 by physical factors caused by the use of a new or altered road. The assessment of claims that are made and which lead to the payment of compensation is a time consuming process and the Heads of Transport have advised that they would support a small central claims team, to be hosted by Bristol City Council Property Service, as the most efficient and effective way of dealing with all valid Part 1 Claims. A Memorandum of Understanding (MoU) will be required to cover decisions

and payments to be made by this central team, on behalf of all three authorities. The cost of the claims team will be met by the three authorities in accordance with the cost sharing agreements set out in the Joint Promotion Agreements.

2. The MoU made between the three Unitary authorities will ensure that a properly qualified team are set up and provided with necessary resources to process and adjudicate claims. The establishment of a team will ensure that all claims are dealt with promptly and consistently and will help to ensure exposure to litigation and interest payments for late payment of compensation are minimised.

Advice given by Joanne Mansfield, Lawyer, Legal Services Date 10th July2017 Access to information (background papers): Bristol City Council Cabinet Report 2nd February 2009 https://www.bristol.gov.uk/committee/2009/ua/agenda/0202_1800_ua000.html Bristol City Council Cabinet Report 10th December 2009 https://www.bristol.gov.uk/committee/2009/ua/agenda/1210_1800_ua000.html Bristol City Council Full Council 19th January 2010 https://www.bristol.gov.uk/committee/2010/ta/agenda/0119_1400_ta000.html Bristol City Council Cabinet Report 25th March 2010 https://www.bristol.gov.uk/committee/2010/ua/agenda/0325_1800_ua000.html Bristol City Council Full Council 29th June 2010 https://www.bristol.gov.uk/committee/2010/ta/agenda/0629_1800_ta000.html Bristol City Council Cabinet Report 21st July 2011 https://www.bristol.gov.uk/committee/2011/ua/agenda/0721_1800_ua000.html Bristol City Council Cabinet Report 1st September 2011 https://www.bristol.gov.uk/committee/2011/ua/agenda/0901_1800_ua000.html Bristol City Council Cabinet Report 26th January 2012 https://www.bristol.gov.uk/committee/2012/ua/agenda/0126_1800_ua000.html Bristol City Council Cabinet Report 4th October 2012 https://www.bristol.gov.uk/committee/2012/ua/agenda/1004_1800_ua000.html Bristol City Council Cabinet Report 29th May 2013 https://www.bristol.gov.uk/committee/2013/ua/agenda/0529_1600_ua000.html Bristol City Council Cabinet Report 27th June 2013 https://www.bristol.gov.uk/committee/2013/ua/agenda/0627_1800_ua000.html Bristol City Council Cabinet 16th January 2014 https://www.bristol.gov.uk/committee/2014/ua/ua000/0116_9.pdf Bristol City Council Cabinet 7th October 2014

https://www.bristol.gov.uk/committee/2014/ua/ua000/1007_7.pdf Bristol City Council Cabinet 7th October 2014 https://www.bristol.gov.uk/committee/2015/ua/agenda/0113_1800_ua000.html Bristol City Council Cabinet 13th January 2015 https://www.bristol.gov.uk/committee/2015/ua/ua000/0113_8.pdf Bristol City Council Cabinet 1st November 2016 https://democracy.bristol.gov.uk/documents/g235/Public%20reports%20pack%2001st-Nov-2016%2016.00%20Cabinet.pdf?T=10 Bristol City Council Audit Committee 25th September 2015 https://democracy.bristol.gov.uk/Data/Audit%20Committee/201509250930/Agenda/0925_11.pdf Full Business Cases for all of the MetroBus schemes http://travelwest.info/projects/major-transport-schemes

Photographs of Construction Works

Ashton Vale to Temple Meads - busway

Ashton Vale to Temple Meads - Winterstoke Road, Skew Bridge

Ashton Vale to Temple Meads - Ashton Avenue Swing Bridge

Ashton Vale to Temple Meads - Busway and new stops for Create Centre behind A Bond

South Bristol Link – approach to A370 Roundabout

South Bristol Link - Brookgate link, connecting businesses to the South Bristol Link and

national road network

South Bristol Link - railway underbridge

South Bristol Link - A38 roundabout

South Bristol Link - Anton Bantock Way

North Fringe to Hengrove Package - M32 bus-only junction

North Fringe to Hengrove Package - M32 bus lane

North Fringe to Hengrove Package - Baldwin Street link

North Fringe to Hengrove Package - Baldwin Street Link

Cabot Circus, new stop

Redcliff Hill, new stop

Queens Square, new stop